Citigroup Inc. said Monday it expects third-quarter profits will be off 60 percent from last year because of about $3.3 billion in write-downs and losses on leveraged loans, subprime mortgage-backed securities (MBS), and other investments.
In securities and banking, Citigroup said it lost $1.3 billion on subprime MBS warehoused for future collateralized debt obligation (CDO) securitizations, leveraged loans warehoused for future collateralized loan obligation (CLO) securitizations, and CDO positions.
Citigroup also wrote down by $1.4 billion the value of leveraged finance commitments totaling $57 billion at the end of the third quarter. Another $600 million in pretax losses were attributed to fixed-income credit trading, which suffered from “significant market volatility and the disruption of historical pricing relationships.”
Citigroup’s Global Consumer division saw credit costs increase by $2.6 billion, driven up by higher credit losses and increased loan loss reserves, according to a Securities and Exchange Commission filing.
At the beginning of the year, Citigroup moved to acquire ABN AMRO Mortgage Group and its $224 billion mortgage servicing portfolio. Three months later, it announced more than 1,300 layoffs as it folded the company into its own mortgage unit, CitiMortgage Inc.
Swiss bank UBS AG on Monday said it was laying off 1,500 workers after it was forced to write down the value of securities related to subprime MBS by $3.4 billion.
Citigroup moved up the release of third-quarter earnings from Oct. 19 to Oct. 15, with Bank of America Corp. and JPMorgan Chase also reporting their results that week.